Transition to Business

The shift to business software also brought changes in management. Up
until 1983, Berez had served as President and performed all the duties
normally associated with a Chief Executive Officer. When work on
Cornerstone began, it was obvious that the company needed more
capital. Both Berez and Vezza met with various venture capital firms
in search of additional funding. Vezza believed that the company
needed an official CEO who had experience and clout to attract
investors. Some firms were wary of giving money to young
entrepreneurs who had little business experience. But they would be
more comfortable dealing with Vezza, an older, seasoned leader.

Soon after, Vezza began more discussions with investors to raise money
for Cornerstone. Ray Stata, founder of Analog Devices, Inc. and a
friend of Vezza, took an interest in the company. Stata offered to
secure a $2,000,000 three-year subordinated loan from the Bank of
Boston in exchange for options to buy $2,000,000 in stock and a
position on the Board . On December 15, 1983, the Board approved the
loan, increased the number of Directors from five to six, and elected
Stata to the Board. Stata's endorsement of the company seemed to have
helped the company's image. In the Board meeting of January 25th,
1984, "Mr. Vezza noted that even more potential investors have shown
interest in us, following Mr. Stata's investment."

Although Stata's investment helped, Infocom found it difficult
it to raise money. Venture capitalists were reluctant to invest large
amounts of money on a company that had leaders who had no prior
business experience. Vezza also believed that the relaxed, fun-loving
engineering culture also worked against the company. He believed that
East Coast venture capitalists wanted to invest in serious,
professional-looking companies. Investors would initially be
impressed with Infocom's bottom-line and potential for growth, but
they would be displeased by the lack of a serious atmosphere once they
visited Infocom. One firm reportedly told Vezza, "You have a bunch of
talented, undisciplined bunch of people, and you're not going to be
able to control them." That Infocom managed to become a $10 million
company just made them arrogant, Vezza said.

There was also a strong desire among Infocom's leaders to
retain control of the company. In 1983, Gulf and Western was
interested in buying the company for $11 million. The deal was
rejected not only because the Board felt the company was worth more,
but also because Gulf and Western wanted to impose their own entire
organizational structure on Infocom.

Infocom, however, managed to get some additional funding. On
October 24th, 1984, the Board approved the borrowing of $500,000
dollars from Massachusetts Capital Resource Company (MCRC), a
state-run venture capital firm dedicated to helping
Massachusetts-based companies. But the MCRC investment was the only
venture capital Infocom received.